Solyndra - Let's Keep It Real Folks

Election year politics ensure that Solyndra is going to get at least a full news cycle's worth of attention. Here are some interesting facts to consider as the Solyndra kerfluffle builds steam:

Solyndra was a very small piece of the policy picture - Solyndra's $535M loan is just 1.2% of the total $38.6B loan guarantees issued by DOE. (Source: DOE.)

All energy is subsidized and loan guarantees are equal opportunity - Guess who the biggest loan guarantee went to? Some big wind or solar boondoggle? Guess again: an $8.3B loan guarantee for a nuclear plant down in Georgia. (Source: DOE.)

Solyndra is not the 'solar industry' - Solyndra failed precisely because conventional silicon-based solar is doing so well--the solar industry has reduced the cost of solar by 70% in since 2009. Solyndra had a $2/Watt technology trying to compete against $1/Watt silicon PV.

Not all solar needs loan guarantees - Large scale silicon-based solar PV projects can be financed without loan guarantees. My company is currently financing almost $2B of solar projects, none of which will rely upon loan guarantees. That's because silicon-based solar is highly reliable and has decades of proven performance--making it very attractive to investors seeking low-risk returns.

It's not China's fault - China's subsidized loans to PV manufacturers account for maybe a 10% price advantage relative to non-Chinese competitors offering similar silicon-based products. It can't possibly explain the 100% price gap between Solyndra and today's PV. The explanation? Silicon , which was trading at $200/kg+ when Solyndra started, is now at $45/kg and falling. It's that simple.

None of this is meant to minimize the significance of the loss--$535M is a lot of money and if there was any misbehavior in how the loan was awarded it should be dealt with to the full extent of the law--but perspective is important.

I'm CEO of Recurrent Energy, a leading developer of solar projects for utilities and large energy customers. Recurrent Energy develops, builds, finances, and operates solar power projects--marketing clean electricity at competitive rates via Power Purchase Agreements or feed-in tariffs in North America, Europe, and emerging markets worldwide. Recurrent Energy is a US subsidiary of Sharp ...

“Guess who the biggest loan guarantee went to? Some big wind or solar boondoggle? Guess again: an $8.3B loan guarantee for a nuclear plant down in Georgia.”

Here are the facts: the premium charged by DOE for the nuclear plant construction loan guarantees were so onerous that even the Vogtle 3&4 project almost turned it down as uneconomic, despite their stellar credit record.

Solyndra is not the 'solar industry' - Solyndra failed precisely because conventional silicon-based solar is doing so well--the solar industry has reduced the cost of solar by 70% in since 2009. Solyndra had a $2/Watt technology trying to compete against $1/Watt silicon PV.

Germany and Spain, the two biggest markets for PV solar, have significantly reduced subsidies. As a result there was a glut of PV panels in Germany and Spain.

On top of that, China, a low-cost producer of many products, simultaneously decided to ramp up its solar panel production using highly efficient, newly-built plants with the latest technology. It now produces about 60% of the world's solar panels; a few years ago it produced about nothing.

Prices of conventional solar panels collapsed just as Solyndra came on line with its devices that were about 2 times more expensive. To scale up production would have required many $billions and several years with no guarantee its prices would be comparable with China's.

Did the prices of homeowner PV systems decline? Hardly. I obtained a quote for a 5 kW system 3 years ago and just recently and, to my surprise, the quotes were about the same, $5,500/kW. I mentioned it to the installer. He responded that I would be getting 30% from the feds and about 10% from the state, meaning he was fattening his profit margins by means of subsidies and not passing on the panel cost reductions to the buyer.

If Solyndra's technology is so great it will have no problem licensing it to others. To think that it could gather the resources from private investors and the federal government to outproduce China was naive. Its business plan was flawed. The fact that the FBI raided its offices may indicated other flaws than just the business plan.

A guest says:

wait, you spoke to *one* solar installer who clearly is overcharging and this counts as reasonable data? one data point?

bottom line, solar manufacturers have drastically dropped prices -- that is the point fromt he article.

however, one must question the article's claim that solyndra would have made it if silicon prices didn't drop so fast. solyndra was so far off the mark that they didn't stand a chance. they need to look at themselves for fault; it's that simple.

regarding the 'scandal' around this, it's ridiculous and of course sad politics. private investors pured over a billion into solyndra, of their own money. while this doesn't excuse the DOE's poor investment, the fact that professional investors were placing big bets should make it pretty clear that DOE wasn't the only group making a mistake.

The unneeded contruction costs were contrary to any start-up business plan. Sinking money into a building made no sense, unless we consider perhaps they hit the peak of real estate markets and couldn't find leased space.

The thin film CIGS, combined with the cylindrical optical capture was a good idea. A better idea is cut the semiconductor costs further with a concentrated PV at the end of a cylindrical light pipe. So I think technology is already moving in that direction. The claimed 30 year product lifetime is rare for any product in technology.

Maybe silicon can some day be an important part of multijunction broadband efficient PVs. Perhaps dyes will become important. There are a lot of patents in play right now. This will be an interesting story.

A guest says:

Rick,

There appears to be increasing interest in concentrating solar systems. However, it is important to remember that they can only concentrate direct radiation. Areas with significant cloud cover offer mostly diffuse radiation, which cannot be effectively concentrated.

Yes, Ed, the lenses and mirrors work that way. But dyes do not. Nor do light pipes with certain features.

That is why the Solyndra cylinders are nice: besides their structural properties they are very versatile optical devices. The areal thin film CIGS didn't work, and bankruptcy is a good way to escape a warranty.

Thanks for a succinct summary of the key factors affecting Solyndra. Its bankruptcy clearly doesn't signal the demise of the solar industry, though the conditions you describe could have equally adverse effects on some other start-ups that may also have placed the wrong bets for the current environment.

The more worrying aspect of this story for me is that the polysilicon price trend described in your last bullet was already evident in late 2008, well before the Solyndra loan guarantee was inked. If it turns out that corners were cut on the due diligence for this loan--it was in fact a loan, not just a loan guarantee--did that happen with any of the other projects for which the DOE's Loan Program Office signed off?

A guest says:

The $1/watt refers only to the photovoltaic device, the cost of which comprises 25% to 30% of total installation costs. The remainder of costs are divided among necessary equipment (inverters, electrical infrastructure, etc), installation labor, engineering/development costs (land acquisition, permitting, etc) and profit, if any.

A guest says:

Thanks! $1/watt is impressive. Looks like it would be very economic @ 100% of my residential electric usage. I'm assuming your numbers are for generating station costs, any idea what the $/watt is for residential installation?

You should recall that the figure in question is for nameplate capacity, which in the best case would only generate about 25% of the time. So effective $/W is at least 4x(module cost/W + installation cost/W). Hence the need for significant incentives in most locations, and the pressure to keep driving module and non-module costs lower.

In Vermont, mostly cloudy, as is Germany, the current subsidies are equivalent to about 50% of the levelized (owning + O&M) cost on 25-year spreadsheets. Even with such subsidies, the levelized (owning + O&M) cost of utility energy to consumers is less than of PV solar in Vermont; real-world CF 0.120 out of a theoretical 0.143, due to roofs not correctly-angled and true-south-facing, panels not clean, partially shaded, partially ice/snow-covered and aging.

There is not enough money in China to subsidize at these levels for any large MW capacity for any length of time (a la Germany's PV solar buildout with subsidies, real-world CF 0.95) given the poor US economic, fiscal and monetary outlook.